HF 2596 (LSB 5919HV (1) 91)

HOUSE FILE 2596

BY  COMMITTEE ON AGRICULTURE

(SUCCESSOR TO HSB 745)

A BILL FOR

An Act regulating the marketing of grain, and making penalties applicable.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I
GRAIN DEALERS

    Section 1.  Section 203.3, subsection 4, paragraph b, Code 2026, is amended to read as follows:
   b.  (1)  The grain dealer shall submit to the department, as required by the department, a financial statement that is accompanied by an unqualified opinion based upon an audit performed by a certified public accountant licensed in this state.
   (2)  Notwithstanding subparagraph (1), if a grain dealer does not purchase grain by credit-sale contract, the department may accept any of the following:
   (a)  A qualification in an opinion based on an audit that is unavoidable by any audit procedure that is permitted under generally accepted accounting principles. An opinion that is qualified because of a limited audit procedure or because the scope of an audit is limited shall not be accepted by the department.
   (b)  A financial statement that is accompanied by the report of a certified public accountant licensed in this state. The report must be based upon a review performed by the certified public accountant. The report shall be in lieu of an unqualified opinion based on an audit. However, at any time, upon good cause, the department may require the grain dealer to submit to the department a subsequent financial statement that is accompanied by the report.
   (3)  The department shall not require that a grain dealer to submit to the department more than one such unqualified opinion based on an audit per year.
   (4)  A grain dealer shall submit one or more financial statements to the department in addition to the financial statement accompanied by an unqualified opinion based on an audit as required in this paragraph if the department determines that it is necessary to verify the grain dealer’s financial status or compliance with this section.
    Sec. 2.  Section 203.3, subsection 5, paragraph b, Code 2026, is amended to read as follows:
   b.  (1)  The grain dealer shall submit to the department, as required by the department, a financial statement that is accompanied by an unqualified opinion based upon an audit performed by a certified public accountant licensed in this state.
   (2)  Notwithstanding subparagraph (1), the department may accept any of the following:
   (a)  A qualification in an opinion based on an audit that is unavoidable by any audit procedure that is permitted under generally accepted accounting principles. An opinion that is qualified because of a limited audit procedure or because the scope of an audit is limited shall not be accepted by the department.
   (b)  A financial statement that is accompanied by the report of a certified public accountant licensed in this state. The report must be based upon a review performed by the certified public accountant. The report shall be in lieu of an unqualified opinion based on an audit. However, at any time, upon good cause, the department may require the grain dealer to submit to the department a subsequent financial statement that is accompanied by the report.
   (3)  The department shall not require that a grain dealer to submit to the department more than one such unqualified opinion based on an audit per year.
   (4)  A grain dealer shall submit one or more financial statements to the department in addition to the financial statement accompanied by an unqualified opinion based on an audit required in this paragraph if the department determines that it is necessary to verify the grain dealer’s financial status or compliance with this section.
    Sec. 3.  Section 203.8, subsection 2, paragraph a, Code 2026, is amended to read as follows:
   a.  (1)  “Delivery” Subject to subparagraph (2), “delivery” means the transfer of title to and possession of grain by a seller to a grain dealer or to another person in accordance with the terms of an agreement of by the seller and the grain dealer.
   (2)  Unless title to grain was previously transferred pursuant to an ordinary cash-sale contract, title to grain sold by credit-sale contract is deemed to have transferred to the grain dealer when all of the following occurs:
   (a)  The credit-sale contract is signed by both the grain dealer and the seller.
   (b)  The grain dealer has possession of the grain or another person has possession of the grain in accordance with the terms of the credit-sale contract.
    Sec. 4.  Section 203.12, subsection 1, Code 2026, is amended to read as follows:
   1.  Upon the cessation of a grain dealer license by revocation, cancellation, or expiration pursuant to section 203.10 or upon the filing of a petition in bankruptcy by a grain dealer, any claim for the purchase price of grain against the grain dealer shall be made in writing and filed with the grain dealer and with the issuer of a deficiency bond or of an irrevocable letter of credit and with the department within one hundred twenty days after the date of the cessation or the filing of a petition in bankruptcy, whichever occurs earlier. A failure to make this timely claim relieves the issuer and the grain depositors and sellers indemnity fund provided in chapter 203D of all obligations to the claimant.
    Sec. 5.  Section 203.12A, subsection 5, Code 2026, is amended to read as follows:
   5.  The Iowa grain indemnity fund board, upon written demand of the grain dealer, shall file a termination statement with the secretary of state, if after one hundred eighty days from the date that the lien is perfected the grain dealer’s license has not ceased by revocation, cancellation, or expiration pursuant to section 203C.10. Upon filing the termination statement, the lien becomes unperfected. The board shall also deliver a copy of the termination statement to the grain dealer.
DIVISION II
GRAIN OPERATORS

    Sec. 6.  Section 203C.6, subsection 4, paragraph b, Code 2026, is amended to read as follows:
   b.  (1)  The warehouse operator shall submit to the department, as required by the department, a financial statement that is accompanied by an unqualified opinion based upon an audit performed by a certified public accountant licensed in this state.
   (2)  Notwithstanding subparagraph (1), the department may accept any of the following:
   (a)  A qualification in an opinion based on an audit that is unavoidable by any audit procedure that is permitted under generally accepted accounting principles. An opinion that is qualified because of a limited audit procedure or because the scope of an audit is limited shall not be accepted by the department.
   (b)  A financial statement that is accompanied by the report of a certified public accountant licensed in this state. The report must be based upon a review performed by the certified public accountant. The report shall be in lieu of an unqualified opinion based on an audit. However, at any time, upon good cause, the department may require the warehouse operator to submit to the department a subsequent financial statement that is accompanied by the report.
   (3)  The department shall not require that a warehouse operator to submit to the department more than one such unqualified opinion based on an audit per year.
   (4)  A warehouse operator shall submit one or more financial statements to the department in addition to the financial statement accompanied by an unqualified opinion based on an audit as required in this paragraph if the department determines that it is necessary to verify the warehouse operator’s financial status or compliance with this section.
    Sec. 7.  Section 203C.6, subsection 5, paragraph b, Code 2026, is amended to read as follows:
   b.  (1)  The warehouse operator shall submit to the department, as required by the department, a financial statement that is accompanied by an unqualified opinion based upon an audit performed by a certified public accountant licensed in this state.
   (2)  Notwithstanding subparagraph (1), the department may accept any of the following: 
   (a)  A qualification in an opinion based on an audit that is unavoidable by any audit procedure that is permitted under generally accepted accounting principles. An opinion that is qualified because of a limited audit procedure or because the scope of an audit is limited shall not be accepted by the department.
   (b)  A financial statement that is accompanied by the report of a certified public accountant licensed in this state. The report must be based upon a review performed by the certified public accountant. The report shall be in lieu of an unqualified opinion based on an audit. However, at any time, upon good cause, the department may require the warehouse operator to submit to the department a subsequent financial statement that is accompanied by the report.
   (3)  The department shall not require that a warehouse operator to submit more than one such unqualified opinion based on an audit per year.
   (4)  A warehouse operator shall submit one or more financial statements to the department in addition to the financial statement accompanied by an unqualified opinion based on an audit as required in this paragraph if the department determines that it is necessary to verify the warehouse operator’s financial status or compliance with this section.
    Sec. 8.  Section 203C.12A, subsection 5, Code 2026, is amended to read as follows:
   5.  The Iowa grain indemnity fund board shall upon written demand of the warehouse operator file a termination statement with the secretary of state, if after one hundred eighty days from the date that the lien is perfected the warehouse operator’s license has not ceased by revocation, cancellation, or expiration pursuant to section 203C.10. Upon filing the termination statement, the lien becomes unperfected. The board shall also deliver a copy of the termination statement to the warehouse operator.
    Sec. 9.  Section 203C.14, subsection 2, paragraphs a and c, Code 2026, are amended to read as follows:
   a.  Upon the cessation of a warehouse operator’s license due to revocation, cancellation, or expiration pursuant to section 203C.10 or upon the filing of a petition in bankruptcy by a warehouse operator, a claim against the warehouse operator arising under this chapter shall be made in writing with the warehouse operator, with the issuer of a bond on agricultural products other than bulk grain, a deficiency bond, or an irrevocable letter of credit, and, if the claim relates to bulk grain, with the department. The claim must be made within one hundred twenty days after the cessation of the license or the filing of a petition in bankruptcy, whichever occurs earlier. The failure to make a timely claim relieves the issuer and, if the claim relates to bulk grain, the grain depositors and sellers indemnity fund provided in chapter 203D of all obligations to the claimant.
   c.  This subsection does not apply if a receiver is appointed as provided in this chapter pursuant to a petition which that is filed by the department prior to the expiration of one hundred twenty days after cessation of a warehouse operator’s license pursuant to section 203C.10.
    Sec. 10.  Section 203C.18, subsection 3, Code 2026, is amended to read as follows:
   3.  A form for a warehouse receipt shall only be printed by a person approved by the department. A form for a warehouse receipt shall be printed in accordance with specifications set forth by the department. A warehouse operator shall surrender to the department all forms for warehouse receipts that are unused at the time that the warehouse operator’s license is suspended or ceases due to revocation, cancellation, or expiration pursuant to section 203C.10. The warehouse operator shall surrender the warehouse receipts in a manner required by the department.
DIVISION III
GRAIN DEPOSITORS AND SELLERS INDEMNIFICATION

    Sec. 11.  Section 203D.3A, subsection 2, Code 2026, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  e.  (1)  If the per-bushel fee is passed on to a seller, the per-bushel fee shall occur at the time of payment.
   (2)  As used in subparagraph (1), “payment” means the same as defined in section 203.8.
    Sec. 12.  Section 203D.6, subsection 8, paragraph a, Code 2026, is amended to read as follows:
   a.  Upon a determination by the board that an eligible claim satisfies the requirements in subsection 4, the board shall indemnify the claimant as a depositor under subsection 5, and a seller under subsection 6. Upon a determination by the board that an eligible repayment claim was filed by that seller under section 203D.6A derives from the same covered transaction during the claim period, and the repayment loss incurred for that claim, the board shall indemnify the claimant as a seller subject to the requirements of this section and section 203D.6A.
    Sec. 13.  Section 203D.6A, subsection 2, Code 2026, is amended to read as follows:
   2.  To be timely, a seller must file a repayment claim with the department not later than sixty days after the amount of the seller’s loss is finalized by a bankruptcy court, whether by an order issued, judgment entered, or settlement agreement approved.  However, if a seller’s loss is based upon a bankruptcy court’s default judgment, to be timely, the seller must file a repayment claim with the department not later than sixty days after the bankruptcy court’s default judgment is entered or a subsequent settlement agreement is approved and entered, whichever is later.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   BACKGROUND. The department of agriculture and land stewardship (DALS) regulates grain marketing transactions under three interrelated Code chapters. The first two Code chapters regulate grain marketers, including Code chapter 203 providing for the regulation of a grain dealer purchasing grain from a seller and Code chapter 203C providing for the regulation of a warehouse operator storing grain for a depositor. Code chapter 203D establishes the grain depositors and sellers indemnity fund (indemnity fund) created to indemnify a seller or depositor against a financial loss due to the management of the grain by the grain dealer or warehouse operator. 
   Under Code chapter 203, in a cash sale transaction, a grain dealer must pay the seller the purchase price for grain upon the grain’s delivery or upon demand for payment by the seller (Code section 203.8). Delivery occurs when title to and possession of the grain is transferred to the grain dealer or another person in accordance with the terms of the contract (Code section 203.8). One special type of sale is the use of a credit-sale contract in which a grain dealer enters a contract with a seller for the sale of grain and delivery of the grain has occurred but payment has not been made either because the price has not been agreed to (a deferred-pricing contract) or the price has been agreed to but payment is to be made more than 30 days later (a deferred-payment contract) (Code section 203.15). Under both Code chapters 203 and 203C, DALS regulates a grain dealer and warehouse operator by issuing a license and conducting inspections of their business operations. A grain dealer or warehouse operator must be issued either a class 1 or class 2 license based on the size of the business operation with a class 1 license requiring higher net worth requirements (Code sections 203.3 and 203C.6). However, a class 1 license is required for a grain dealer who enters into a credit-sale contract regardless of the size of the grain dealer’s operation. A class 1 or class 2 licensee must annually submit to DALS a financial statement accompanied by an unqualified opinion based upon an audit performed by a certified public accountant (CPA) licensed in this state. In 2025, the general assembly enacted 2025 Iowa Acts, chapter 105 (2025 Act), which eliminated provisions that allowed a licensed grain dealer or licensed grain warehouse operator to submit a financial statement accompanied by a report of a state-licensed CPA based upon a review in lieu of an unqualified opinion. The 2025 Act allowed the indemnity fund to cover a loss arising from a deferred-payment contract (Code sections 203D.6 and 203D.6A). The 2025 Act also provided a separate process for a seller to be indemnified for a loss resulting from the seller having received from the grain dealer an amount from the purchased grain that the seller was required to later pay back to the grain dealer’s bankruptcy estate (Code section 203D.6A). A license of a grain dealer or warehouse operator may cease due to any one of three causes, including revocation by DALS, cancellation by the grain dealer, or the expiration of the license by operation of law. All of these causes are covered under Code sections 203.10 and 203C.10. Upon any of these causes, a seller may claim the purchase price for the sold grain, which may trigger a claim for a loss under the indemnity fund.
   BILL’S PROVISIONS. Division I of this bill amends Code section 203.8 by providing that unless title to grain was previously transferred pursuant to an ordinary cash sale contract, title to grain sold by credit-sale contract is deemed to have transferred to the grain dealer upon two conditions: (1) the credit-sale contract is signed by both the grain dealer and the seller and (2) the grain dealer or another person has possession of the grain in accordance with the terms of the credit-sale contract.
   Divisions I and II of the bill amend Code sections 203.3 and 203C.6A by allowing a grain dealer (except a grain dealer entering into a credit-sale contract) or a warehouse operator to again submit a financial statement accompanied by a report of a state-licensed CPA based upon a review in lieu of an unqualified opinion. Divisions I and II of the bill provide that a claim for a loss incurred by a seller or depositor may be triggered by the filing of a bankruptcy petition by a grain dealer or warehouse operator. The bill also amends a number of provisions that refer to the revocation, cancellation, or expiration of the license by instead referring to either Code section 203.10 or 203C.10, which describe those types of actions. 
   Division III of the bill amends Code section 203D.6 by providing for the indemnification of a seller for grain purchased by a grain dealer that the seller was required to pay back later in bankruptcy. The claim may proceed upon a determination that an eligible repayment claim was filed with DALS by the seller as required by statute. Finally, division III amends Code section 203D.6A by providing for the timeliness of a repayment claim in the case of a bankruptcy court’s default judgment. In that case, the seller must file a claim not later than 60 days after the court’s judgment or a settlement agreement is approved, whichever is later.